Question 1

Assume the following sales data for a company:Current year$1,025,000Preceding year820,000​What is the percentage increase in sales from the preceding year to the current year?

Accepted Answer

A)   100%
B)   25%
C)   125%
D)   75%E) All of the above
F) A) and D)

Question 2

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

Accepted Answer

A) True 
 B)False

Question 3

Times interest earned is computed as

Accepted Answer

A)   net income plus interest expense, divided by interest expense
B)   income before income tax plus interest expense, divided by interest expense
C)   net income divided by interest expense
D)   income before income tax divided by interest expenseE) None of the above
F) A) and B)

Question 4

Rho, Sigma, and Tau companies have the following data for the current year:​​  Which company would be expected to have the best potential for future common stock price appreciation?

Accepted Answer

The price-earnings
(P/E) ratio on commo...

Question 5

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Accepted Answer

A) True 
 B)False

Question 6

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

Accepted Answer

A)   vertical analysis
B)   horizontal analysis
C)   liquidity analysis
D)   solvency analysisE) None of the above
F) A) and B)

Question 7

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.

Accepted Answer

A) True 
 B)False

Question 8

A common measure of liquidity is

Accepted Answer

A)   the asset turnover ratio
B)   dividends per share of common stock
C)   the accounts receivable turnover
D)   the profit marginE) A) and C)
F) A) and B)

Question 9

The excess of current assets over current liabilities is referred to as working capital.

Accepted Answer

A) True 
 B)False

Question 10

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Accepted Answer

A) True 
 B)False

Question 11

A change from one acceptable accounting method to another is reported

Accepted Answer

A)   on the statement of retained earnings, as a correction to the beginning balance
B)   on the income statement, below income from continuing operations
C)   on the income statement, above income tax expense
D)   through a retroactive restatement of prior period earningsE) A) and D)
F) A) and B)

Question 12

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Accepted Answer

A) True 
 B)False

Question 13

Match each definition that follows with the term (a-h)  it defines.
-Useful for comparing one company to another or to industry averages

Accepted Answer

A)  Solvency
B)  Leverage
C)  Times interest earned
D)  Horizontal analysis
E)  Vertical analysisF) Common-sized financial statementsG) Current position analysisH) Profitability analysisI) A) and B)
J) A) and C)

Question 14

The independent auditor's report

Accepted Answer

A)   describes which financial statements are covered by the audit
B)   gives the auditor's opinion regarding the fairness of the financial statements
C)   summarizes what the auditor did
D)   states that the financial statements were presented on timeE) B) and C)
F) A) and C)

Question 15

Match each ratio that follows to its use (items a-h) . Items may be used more than once.
-Asset turnover ratio

Accepted Answer

A)  Assess the profitability of the assets
B)  Assess how effectively assets are used
C)  Indicate the ability to pay current liabilities
D)  Indicate how much of the company is financed by debt and equity
E)  Indicate instant debt-paying abilityF) Assess the profitability of the investment by common stockholdersG) Indicate future earnings prospectsH) Indicate the extent to which earnings are being distributed to common stockholdersI) None of the above
J) A) and D)

Question 16

Which of the following is not included in the computation of the quick ratio?

Accepted Answer

A)   inventory
B)   marketable securities
C)   accounts receivable
D)   cashE) B) and C)
F) A) and D)

Question 17

Assume the following sales data for a company:??   Current year $325,000 Preceding year 250,000\begin{array} { l r } 	ext { Current year } & \$ 325,000 \	ext { Preceding year } & 250,000\end{array} Current year  Preceding year ​$325,000250,000​  What is the percentage increase in sales from the preceding year to the current year?

Accepted Answer

A)   70%
B)   76.9%
C)   30%
D)   50% E) A) and D)
F) None of the above

Question 18

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the questions that follow.
​
 
-Using the data provided for Diane Company, what is the return on total assets?

Accepted Answer

A)   10%
B)   8%
C)   0.1%
D)   1%E) B) and C)
F) A) and D)

Question 19

In a company's annual report, the section called Management Discussion and Analysis provides critical information for interpreting the financial statements and assessing the future of the company.

Accepted Answer

A) True 
 B)False

Question 20

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Accepted Answer

A)   $845,000
B)   $595,000
C)   $720,000
D)   $125,000E) A) and D)
F) C) and D)

Exam 17: Financial Statement Analysis

The excess of current assets over current liabilities is referred to as working capital.

Correct Answer
verified

Correct Answer
verified

A change from one acceptable accounting method to another is reported

Correct Answer
verified

In a company's annual report, the section called Management Discussion and Analysis provides critical information for interpreting the financial statements and assessing the future of the company.

Correct Answer
verified

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Correct Answer
verified

Assume the following sales data for a company:Current year$1,025,000Preceding year820,000What is the percentage increase in sales from the preceding year to the current year?

Correct Answer
verified

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

Correct Answer
verified

The independent auditor's report

Correct Answer
verified

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.

Correct Answer
verified

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Correct Answer
verified

Times interest earned is computed as

Correct Answer
verified

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Asset turnover ratio

Correct Answer
verified

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Correct Answer
verified

Which of the following is not included in the computation of the quick ratio?

Correct Answer
verified

Rho, Sigma, and Tau companies have the following data for the current year: Which company would be expected to have the best potential for future common stock price appreciation?

Correct Answer
verified
The price-earnings
(P/E) ratio on commo...
View Answer

Match each definition that follows with the term (a-h) it defines. -Useful for comparing one company to another or to industry averages

Correct Answer
verified

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Correct Answer
verified

Assume the following sales data for a company:?? $\begin{array} { l r } \text { Current year } & \$ 325,000 \\\text { Preceding year } & 250,000\end{array}$ What is the percentage increase in sales from the preceding year to the current year?

Correct Answer
verified

A common measure of liquidity is

Correct Answer
verified

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

Correct Answer
verified

Exam 17: Financial Statement Analysis

The excess of current assets over current liabilities is referred to as working capital.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A change from one acceptable accounting method to another is reported

Correct AnswerverifiedShow Answer

In a company's annual report, the section called Management Discussion and Analysis provides critical information for interpreting the financial statements and assessing the future of the company.

Correct AnswerverifiedShow Answer

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Correct AnswerverifiedShow Answer

Assume the following sales data for a company:Current year$1,025,000Preceding year820,000​What is the percentage increase in sales from the preceding year to the current year?

Correct AnswerverifiedShow Answer

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

Correct AnswerverifiedShow Answer

The independent auditor's report

Correct AnswerverifiedShow Answer

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.

Correct AnswerverifiedShow Answer

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Correct AnswerverifiedShow Answer

Times interest earned is computed as

Correct AnswerverifiedShow Answer

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Asset turnover ratio

Correct AnswerverifiedShow Answer

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Correct AnswerverifiedShow Answer

Which of the following is not included in the computation of the quick ratio?

Correct AnswerverifiedShow Answer

Rho, Sigma, and Tau companies have the following data for the current year:​​ Which company would be expected to have the best potential for future common stock price appreciation?

Correct AnswerverifiedThe price-earnings (P/E) ratio on commo...View AnswerShow Answer

Match each definition that follows with the term (a-h) it defines. -Useful for comparing one company to another or to industry averages

Correct AnswerverifiedShow Answer

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A common measure of liquidity is

Correct AnswerverifiedShow Answer

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Assume the following sales data for a company:Current year$1,025,000Preceding year820,000What is the percentage increase in sales from the preceding year to the current year?

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Rho, Sigma, and Tau companies have the following data for the current year: Which company would be expected to have the best potential for future common stock price appreciation?

Correct Answer
verified
The price-earnings
(P/E) ratio on commo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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